Public-private sector dialogue on Responsible Competitiveness: Enhancing enterprise development through responsible business practices

Geneva22 Jan 2006

Distinguished delegates,
Ladies and gentlemen,

I am pleased to welcome you to this public-private sector dialogue on "Responsible Competitiveness: enhancing enterprise development through responsible business practices". At the World Summit in New York last September, leaders underscored the importance of enhancing the contribution of civil society, the private sector and other stakeholders to the promotion of development efforts. UNCTAD has long held the view that effective interaction and dialogue between government and the private sector, as well as with civil society, plays a key role in creating a coherent policy framework and effective support structures for the development of enterprises. Therefore I am very happy to see so many distinguished guests and colleagues, from a wide range of backgrounds, here with us this morning. And we are pleased to be hosting a presentation by AccountAbility, a London-based NGO, of their research on the subject of responsible competitiveness.

Many of you will be familiar with the term ´corporate responsibility´. It is a term with several definitions, but which is widely used to describe the voluntary approaches enterprises take to improve their social and environmental performance. The issue of corporate responsibility has been recognized at many international meetings, including the previously mentioned World Summit in New York and the Johannesburg World Summit on Sustainable Development. It was also recognized at UNCTAD XI in São Paulo. It has become clear, and here I am quoting the São Paulo Consensus, that "corporate actors have a positive role to play in stimulating the economic development of host countries and in supporting social and environmental development and the competitiveness of local enterprises". Indeed, any serious discussion of international trade and investment these days ends up addressing issues related to the economic, social and environmental responsibilities of enterprises. This has been seen in both the trade talks at the WTO and in UNCTAD activities, such as the expert meeting on corporate contributions to the economic and social development of host developing countries that many of you attended last November.

We are here today to discuss this intersection of corporate responsibility and economic development. ´Responsible competitiveness´ is a term used to describe this intersection: it suggests a marketplace where businesses are given the kind of market signals and strategic incentives that encourage them to provide positive contributions to economic development while upholding social and environmental standards - what can be called, in short, a ´race to the top´, where economic development, social development and environmental sustainability go together; a ´win-win-win´ scenario.

As businesses from emerging economies seek a greater role in world trade, they recognize the imperative of demonstrating their alignment with universally accepted norms and principles. These enterprises view this alignment as an opportunity to innovate. Let me provide some examples from three of the countries represented here today:

The sugar industry in Brazil. Under pressure to improve its social and environmental impacts, as well as its competitiveness, this industry developed an alternative source of fuel. This strategy not only made the industry more competitive but has also improved working conditions and employment opportunities, along with Brazil´s balance of payments and fuel security.

The Cape wine industry in South Africa. The Cape wine industry has developed a challenging initiative to improve labour standards, building an ethical label that will deliver competitive advantage with international buyers.

And from my colleague at the International Trade Centre, I hope we will hear more about the Better Factories Cambodia initiative, a successful collaboration between the Cambodian Government, textile firms and international agencies like the ILO and the World Bank, aimed at making the textile sector more competitive while also improving workers´ conditions.

What all these examples have in common is that they are collaborative partnerships, with government, trade unions, NGOs and international agencies working closely with businesses large and small for the benefit of economic development.

Today we will be listening to a presentation by AccountAbility of its new analytical framework and measurement tools. They show that responsible business practices can be instrumental in enhancing the competitiveness of enterprises and national economies.
This is an important subject for two reasons. The first is that any improvement in social and environmental conditions is a positive contribution to human development. And any effort by the private sector in this direction should be welcome. This has been recognized by Secretary-General Kofi Annan in his creation of the UN Global Compact. And it has been strongly supported by businesses in developing countries and transition economies: over half of the 2,300 or so companies now participating in the Global Compact are from Latin America, Africa, Asia and Eastern Europe.

The second reason why this subject is so important has to do with competitiveness. As world markets open up, developing countries and their industries must seek to become more competitive. UNCTAD´s interest in this topic is in keeping with its mandate to help integrate developing countries into the world economy on an equitable basis. Increasingly, this will mean focusing on enhancing enterprise competitiveness. Without a dynamic enterprise sector, a country will be unable to take advantage of new trade and investment opportunities.
UNCTAD has contributed to enterprise competitiveness through a number of programmes, including the promotion of SME clustering and linkages, the training of entrepreneurs through its EMPRETEC training centres in 26 countries, the provision of technical support in the area of insurance and the promotion of best practices in enterprise reporting, so as to better attract and retain investment.

Our efforts to promote enterprise competitiveness have also stressed the importance of corporate responsibility. We have developed guidelines on environmental, social and corporate governance reporting, and we are helping to develop the new ISO standard on social responsibility. This new standard is likely to be instrumental in increasing the appeal of enterprises to customers and investors alike, by helping firms implement responsible business practices. And we have a technical assistance project in Brazil, to test how this relationship between corporate responsibility and enterprise development can be operationalized in the field. This includes partners active in the area of corporate responsibility, such as the Fundação Dom Cabral, which is represented here today.

The concept of corporate responsibility is, of course, not without its critics. Some fear that corporate responsibility will be used as a non-tariff barrier, closing off export opportunities under the pretext of demanding compliance with higher social and environmental standards. Others fear that corporate responsibility will entail new and onerous regulations that will stifle economic growth and trade. These are understandable concerns, and we must ensure that demands for corporate responsibility are not used as excuses for excluding developing countries from global markets and do not inhibit the economic growth needed to reduce poverty.

At the same time, we should more fully acknowledge the great benefits and opportunities. There is widespread recognition that the promotion of economic development and the promotion of social and environment protection are mutually reinforcing. Companies worldwide offer a clear business case for behaving responsibly and setting good examples. Many see the implementation of good practices not as short-term costs, but as long-term investments. Failing to act responsibly makes it harder both to attract employees and customers and to sustain long-term economic growth.

These days, responsible business practices are increasingly viewed as an integral part of open and fair international trade: they help to ensure that the benefits of trade lead to real improvements in people´s lives, by boosting their economic well-being and their social and environmental security. Such practices also help to address public concerns about economic globalization, which is often blamed, rightly or wrongly, for various social and environmental problems.

All countries, whatever their level of economic development, can do more to promote initiatives that further both responsible business practices and enterprise competitiveness. According to a 2003 study by the World Bank Group(1), competition between States to attract more investment and boost the competitiveness of their enterprises by lowering social and environmental standards in the hopes of lowering business costs is not a winning strategy. This so-called ´race to the bottom´ is not the path to success; on the contrary. The World Bank data show that corporate responsibility issues are increasingly influencing the investment and purchase decisions of multinational enterprises around the world. Similar conclusions are reached by other researchers on this subject: AccountAbility´s statistical research, for example, shows that a country´s competitiveness is strongly correlated with the degree of responsibility of its business practices. Indeed, UNCTAD´s own Trade and Development Index, introduced last year as a measurement of the trade and development performance of countries, has a strong positive correlation with the National Corporate Responsibility Index compiled by AccountAbility. This means that high standards of corporate responsibility are found in the same countries that rank highly for competitiveness, trade, investment and economic development.

Clearly, there are still many questions about the broad issue of corporate responsibility. There is, for example, a significant gap in the research, especially quantitative research, about the actual interrelationship between economic development and the promotion of social and environmental policies.

But improving our understanding of the relationship between corporate responsibility and enterprise competitiveness could lay the foundations for new trade and investment policies, and new corporate practices, that align social and environmental issues with the need for economic development for the benefit of all stakeholders. It is this type of alignment - this balance of economic, social and environmental imperatives - that is the prerequisite for true sustainable development, and the greatest promise of corporate responsibility. The type of concrete analytical work undertaken by AccountAbility is a good step in this direction.
Thank you for your participation in this event. We look forward to a fruitful discussion on this important subject.